How I Select Investment Management Firms

My approach is to look for a firm with a process that yields repeatable results.  I want to know just what that process is, what factors are taken into account, and if past performance indicates that the process has met the objectives.

I’ve recently selected a firm that takes an academic and research-based approach to investing.  In fact, they have four members of their advisory board who are Nobel Prize winners in the field of economics.  As an economics major myself, I like the mathematical aspect of their processes.

This firm also has the common sense philosophy of focusing on what is within their control.  In other words, they cannot control markets or what the economy does.  But they can use past knowledge to help put together models that take advantage of known fluctuations in the market. 

When evaluating possible investment firms, I also look carefully at the expense.  If fees are high, the return on investment must also be high.  We need to be sure we are getting value – paying what the service is worth, but not more. 

And, I am not a fan of exclusive use of “passive investment management,” which means no active intervention by managers to deviate from standard methods. 

In summary, I look at methods used in indexing, but also incorporate active asset management where we know it can bring value.  By combining these two approaches, we hope to generate positive, consistent, long-term results.